New Mexico is one of the few states that has a gross receipts tax. It functions similarly to other state’s sales taxes, but is imposed on businesses, basically for the privilege of doing business in the state. It can be a bit confusing if you are new to New Mexico or a new to owning a business, so we’ll walk you through the basics.
What are Gross Receipts?
Gross receipts are the total amount of money a business or organization receives from all sources, before anything is deducted. It includes direct and indirect revenues such as sales of products or services, interest, dividends, rent, royalties, fees and commissions and may even include investment income and proceeds from asset sales and refunds.
What is Taxed by the GRT?
The gross receipts tax or GRT is a tax put on the business, and it applies to a broad range of business activities. Products as well as services, selling and leasing property and granting franchise rights within New Mexico are all subject to the GRT. It also applies to certain services that are provided outside of New Mexico if the resulting product was initially used in New Mexico.
Who Pays the GRT?
Any business who does business in New Mexico is subject to the GRT. This includes both physical nexus and economic nexus, meaning any businesses with a physical presence in New Mexico as well as out-of-state businesses that exceed $100,000 in gross receipts from New Mexico consumers, and marketplace providers. It is the business owner’s responsibility to collect, file and pay this tax, however, the actual cost is often passed on to the consumer.
How is the Tax Calculated?
The GRT is calculated using a combination of state and local rates, so the exact rate varies by location. To determine yours, you’ll add the state rate (currently 5.125%) to any local rate where your business operates. The combined rate is then applied to the total gross receipts from your business sales and services.
Filing & Paying GRT
Businesses are required to collect and remit GRT if they have either physical or economic nexus with the state. To do so they must first register their business with the New Mexico Taxation and Revenue Department to get a New Mexico Business Tax Identification Number (NMBTIN). Then they can file and pay online using the New Mexico Taxpayer Access Point (TAP) system, typically monthly but it could be less frequently depending on their liability.
How is GRT Different from Sales Tax?
Gross receipts tax is different from sales tax in a few ways. Gross receipts are paid by businesses, and the tax is applied to the business’s total gross receipts. While sales taxes are collected from customers at the point of sale and are applied to the sales price of the good or service. Therefore, businesses are not required to add GRT to the customer’s bill like sales tax. GRT has a broader tax base since most services in addition to tangible goods are taxed. GRT is also origin-based, meaning the tax is based on the location that the product is delivered to or where the service is performed.
Need More Information or Help with Your New Mexico GRT?
If you have any questions about your Gross Receipts Tax or want help calculating or filing, reach out to Arsenault CPA Firm. We are here to help with all your tax and business needs and are dedicated to helping businesses of all sizes navigate difficult tax issues. Let us give you peace of mind and confidence when it comes to New Mexico Gross Receipts Tax. As a certified public accountant serving individuals and businesses in the Albuquerque, Santa Fe and Farmington areas from Gallup, NM, you can trust our numbers and our tactics. Contact us today for a free consultation.